The Advancement of Apple Pay: Support for Loyalty and Private Label Cards

This is part 1 of a 3 part series. Part 2 can be found here and part 3 can be found here.
With the release of Apple’s iOS9 this fall, Apple’s Passbook app transforms into the Wallet. At the Worldwide Developers Conference, held in San Francisco in June, Apple announced three key updates to the Wallet experience:

  1. Support for Loyalty and Private Label Cards
  2. New Apple Pay Partners
  3. Apple Pay’s Expansion into the UK

This series will examine how each of these announcements affects both Apple and the mobile payments landscape, beginning with support for loyalty and private label cards.
Since the introduction of Apple Pay last fall, pundits have referred to the exclusion of rewards functionality as a crippling lack in the Apple Pay platform. As a trusted and meaningful way for brands to enhance relationships with consumers, loyalty programs are an essential component of commerce.
Beginning this fall, participating members of numerous private label and loyalty programs will no longer need to carry physical cards to earn points with their favorite brands, as their Loyalty ID’s will integrate into the Wallet application. In conjunction with Apple’s announcement, VeriFone revealed they will enable clients to process rewards and loyalty information along with NFC payments via Apple Pay.
Retailers who will provide loyalty functionality with the launch of iOS 9 include BJ’s Wholesale Club, Coca-Cola, Dunkin’ Donuts, JCPenney, Kohl’s Department Stores, Panera Bread, Wegmans Food Markets, and Walgreen’s, whose Balance Reward program is the largest drugstore loyalty program in the nation, with 80 million active members.
This move is important for Apple Pay’s adoption. The adoption of a mobile wallet is dependent on two distinct parties: the merchants and consumers. Regardless of how great a particular mobile payments system may be, it will never saturate the market if merchants don’t accept it and consumers do not use it. The addition of loyalty is notable for its impact on the merchants’ and consumers’ experience with Apple Pay. Loyalty programs inherently give merchants more power to control the way they interact with consumers. Merchants looking to move into the mobile payments space will consider Apple Pay a more attractive option now that they can offer a more complete brand experience via Apple Pay. Consumers looking to earn points on their transactions will now consider Apple Pay to offer a more beneficial experience.
As mobile payments evolve and the Mobile Wars ensue, the winner (if there is to be one) will need to offer a complete commerce experience; meaning, a successful mobile wallet will need the ability to pay in any way that the consumer wishes to transact. By enabling loyalty through Apple Pay, though they still have many gaps that they will need to fill in order to see true saturation of the mobile market, Apple is taking a tremendous step forth in offering a more comprehensive mobile experience at the point of sale.

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